In the Covid-19 lockdown, house buyers and sellers are seeking answers to some very important questions, not least where they stand when it comes to mortgage finance. Here we ask Mark Harris, Chief Executive of SPF Private Clients, to run through some key points.

I am thinking of moving – how can I use this time to get myself ready?

Before applying for a mortgage, you should run a financial health check on yourself to ensure everything is in order. Lockdown is a good opportunity to take a look at your finances, see where you are and what needs improving or changing.

Lenders want to see evidence that you can handle credit and make your monthly payments on time so check your credit file to ensure everything is correct. Even in these troubled times you must maintain and pay any credit commitments, or it will affect your credit score and your ability to get a mortgage. If you are struggling, talk to your provider to see whether there is a solution which doesn’t impact your credit worthiness.

Think about reducing or cutting unnecessary outgoings – something many of us are doing at the moment – and resolve to keep those savings in place post lockdown. Reducing unnecessary outgoings will improve your borrowing and affordability potential.

Get your paperwork together – P60, three months’ worth of bank statements and payslips, and ID, including your passport and at least one utility bill at your current address with your name on it. Make sure you are on the electoral roll so that the lender can find you and confirm your address.

Use this time to make sure you have all these lined up so that when you are ready to apply for your mortgage, it will be a much quicker process.

I was hoping to port my mortgage to a new property – will that now be delayed?

According to Government guidance, only those transactions that are contractually obliged to go ahead and where an agreement to delay can’t be reached, can do so. So much will depend on where you are in the journey of the porting process and the purchase of your next property.

If you are pre-offer, some lenders have paused all lending whereas others have curtailed either some parts of lending or parameters around which they are willing to lend. This is partly due to valuation issues with valuers not able to carry out physical inspections and partly around serviceability, with staff having to work from home. There have also been some changes to lending criteria, such as affordability.

If you are post-offer, lenders are still working these through the system but given the Government guidance, completion is unlikely to occur during lockdown. Once all sides are ready to complete, lenders are likely to check that there have been no material changes to circumstances before agreeing the deal.

I’ve heard I cannot get a mortgage valuation. Is this true?

Most of the larger valuation firms have stopped their surveyors conducting physical valuations but all is not lost.  Lenders are utilising alternative methods to value a property such as automated valuations (AVMs), desktop valuations and remote valuations. Changes are being made on a day-to-day basis.

Lenders are likely to have strict parameters, such as transaction types, property values, property types and loan-to-values. It is worth asking an independent mortgage broker for advice.

I have a mortgage offer but I am worried that it is going to expire – what can I do?

Many lenders have agreed to a three-month extension of mortgage offers. Unfortunately, there is not a blanket response to this, with some lenders offering shorter periods, particularly the specialist lenders. You will have to speak to your lender to find out which camp it falls into.

I took out bridging finance to buy a new home before selling my previous one. What will happen now?

Shorter-term finance situations are less clear and treated on a case-by-case basis. If you can demonstrate that an exchange occurred in early/mid-March, then the lender is more likely to consider a renewal of terms.

I am struggling to pay my mortgage. If I ask for a payment holiday will it affect my credit score when I apply for a new mortgage?

Lenders have agreed that borrowers who have been affected by coronavirus can apply for a three-month payment holiday. This should not impact your credit score but make a note of any correspondence with your lender in case a problem arises later on. It is important that borrowers get in touch with their lender at the earliest opportunity – they are very busy dealing with these enquiries so it may take some time.

It is also important that borrowers don’t cancel any payments before speaking to their lender. It is worth remembering that this is not free money so the payments will be rolled up and added to the mortgage balance. This means your payments are likely to be higher after the holiday.

If you don’t need the payment holiday our advice would be not to apply and leave yourself having to play catch-up later. In that way, it could help someone else who really needs it. 

Will there be any long-term consequences of coronavirus on getting a mortgage after lockdown is over?

When the market returns to ‘normal’, your borrowing potential may be different to that at the start of 2020. For example, incomes including bonuses, overtime and commission may all have been affected. For the self-employed, your accounts may not look as attractive as they did before. You should also be prepared for lenders to ask more questions.

The property market will also have changed and valuations will be a challenge. Physical valuations will return but the process will be different as there will be fewer local market comparables for one.

Further information

Contact Andrew Perratt

For any mortgage queries, contact SPF Private Clients on 0333 222 6688 or email info@spf.co.uk.